Report Recommends Broader Approach to Assessing Changes to New Source Review Rules for Air Pollution

July 21, 2006, WASHINGTON -- A new report from the National Academies’ National Research Council illustrates a broader, more comprehensive approach the U.S. Environmental Protection Agency should use to evaluate changes to New Source Review, a part of the Clean Air Act that governs large, stationary sources of air pollution such as factories and power plants. Although the report’s analysis focuses on the likely effects of EPA’s 2002 and 2003 revisions to the rules – changes that have since, in large part, been struck down by federal courts – it can serve as a case study for how future revisions could be assessed, said the committee that wrote the report.

Under New Source Review, before a new facility can be built or an existing one modified, an applicant must obtain a permit by showing that the new plant or equipment will not disrupt progress toward attaining air quality standards in an area, or significantly worsen air pollution in a locale that already meets them. The applicant also must show that advanced emission-control devices will be added to the plant. In 2002 and 2003 EPA made changes to New Source Review that, among other things, expanded the range of modifications a facility can make without getting a permit. The agency and other supporters predicted that the revisions would not result in significant changes in emissions and would give industry more flexibility to modernize plants and improve energy efficiency. Opponents maintained that the revisions would slow progress in cleaning the nation’s air and thus damage human health. Because of the controversy, Congress asked the Research Council to estimate the revisions’ effects.

It is impossible to quantify with certainty the changes’ impact on emission levels, human health, or energy efficiency, because existing models have limitations and data so far are scarce, the Research Council’s report says. A portion of the 2002 revisions was struck down by a court last year, and the remainder has gone into effect in only a few states. The 2003 revision, known as the Equipment Replacement Provision (ERP), has not been implemented because it was stayed by a court in 2004 and struck down earlier this year.

Modeling can provide some insights into the changes’ likely effects, the report says. Its analysis estimates future national emissions of sulfur dioxide and nitrogen oxides from coal-fired power plants under ERP and compares them with emissions levels that could be expected if pre-revision rules continued. The committee used the same model as EPA, but also added different assumptions to account for other possible scenarios of how aggressively New Source Review might be enforced, other relevant regulations, and varying economic and technological conditions. For example, EPA’s analysis had assumed that if pre-revision rules continued, plants would avoid making modifications that would trigger New Source Review requirements – resulting in older, higher-emitting equipment operating longer without repair. The new analysis, on the other hand, compares emissions under ERP with another scenario, one in which pre-revision rules are enforced more aggressively and lead to more replacements of deteriorating equipment.

For sulfur dioxide, ERP would be expected to result in a moderate decrease in emissions for the first six years or so, followed by a six-year period of little change. But after 12 years ERP would likely result in higher emissions, perhaps substantially so, compared with what would result if pre-revision rules continued – assuming aggressive implementation of the pre-revision rules would have required all power plants to add emission controls by that point. ERP also would be expected to cause an increase in emissions of nitrogen oxides – again, possibly substantial – under certain circumstances after the first few years.

But the difference in emissions between pre-revision and revised rules would be lessened, the committee said, if EPA implements its 2005 Clean Air Interstate Rule (CAIR), a “cap-and-trade” program aimed at lowering emissions from power plants in Eastern and Midwestern states; such programs set limits on overall emissions in an area but allow individual plants to buy and sell pollution “allowances.” With CAIR in place, differences in total sulfur dioxide emissions between pre-revision rules and ERP would be minor, the model suggests. CAIR would also probably moderate an expected increase in nitrogen oxide emissions caused by ERP and delay it for a dozen years, for the scenario in which all facilities would otherwise have added emission controls under the pre-revision rules.

Because current models shed little light on the expected effects of EPA’s rule changes on particular plants and geographic locations and local populations with varying characteristics, no conclusions can be drawn about how the revisions would affect human health, the report says.

At a national level, the model analysis suggests that a cap-and-trade program with caps below those specified by CAIR would be a more cost-effective approach to lowering emissions than aggressive regulation under New Source Review; however, the committee’s analysis was limited because it could not assess specific, local emission changes and their impact on public health.

Models must be improved to better account for how New Source Review and revisions to the rules affect individual plants’ decisions about whether to install new equipment, the report says. And to assess health effects, future models will need to incorporate detailed meteorological information on the appropriate scale, such as regional or local.

Better data collection also is needed to aid future analyses of the revisions’ effects after they are implemented, the committee added. EPA and state agencies should create and maintain a central database of permits issued under New Source Review, as well as minor permits issued by states, so that emissions from plants in states governed by the revised rules can be compared with those from plants operating under pre-revision rules. Data should also be collected on plants’ investments in pollution-control equipment and programs, to allow investigators to study whether the rule changes lead plants to invest more or less in these improvements.

The report was sponsored by the U.S. Environmental Protection Agency. The National Research Council is the principal operating arm of the National Academy of Sciences and the National Academy of Engineering. It is a private, nonprofit institution that provides science advice under a congressional charter. A committee roster follows.

Copies of New Source Review Programs for Stationary Sources of Air Pollution will be available from the National Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at http://www.nap.edu. Reporters may obtain a pre-publication copy from the Office of News and Public Information.